How Do We Combat Shrinkage in Our Store?

Editor’s Note: The November/December Stop Watch magazine Operator to Operator answer provided by NATSO member Chris Wetzel of Jubitz Travel Center was wonderful, but too extensive to print. We didn’t want that great content to go to waste, so we asked him to guest post on NATSO’s blog this week. - AT

How Do We Combat Shrinkage in Our Store?
By guest post contributor Chris Wetzel, Jubitz Travel Plaza

Our shrink management practices includes many parts, which our outlined below. For all of these elements, we follow the garbage in garbage out (GIGO) rule. 

Monthly Inventory
We conduct monthly inventory in all of our food and beverage operations.  Managers are in charge of these counts and conduct these counts with another individual from our accounting department. By delegating this duty to these two positions, we combine the operational strength of product knowledge with the accounting strength of accurate data input.  An additional advantage here is that typically you have some compensation of the food and beverage manager tied to food cost goal and/or an inventory variance goal and with the second individual counting, who is financially neutral individual, you are ensured the integrity of the count.

Over a year ago when we really started to see ingredient costs shooting up, we implemented a weekly cost of goods meeting.  We analyzed the top 10 products with the highest variance by dollar amount combined with a recipe verification.  Ground beef was on our top ten. Here is an example of how we analyzed it:

1. First, we confirmed the pricing and the inventory count were accurate in the system. 
2. Then we confirmed that our printed recipe matched our recipes in our inventory management system. 
3. Next, we updated yield loss on the product and spot-weighed portion controlled items i.e. hamburger patties and meatloaf.
4. Finally, we communicated to our staff the challenges we were having on this product.  I can’t emphasize the importance of gaining the support of your employees when combating shrink. 

We manage your waste.  We track waste and identify our top items. Once identified, we dig down into the details to figure out why and then take corrective action.

We have proper build-to levels on all production charts established so that staff knows what to produce. 

Quarterly Retail Inventory
We contract with an outside agency for our quarterly inventory counts in our convenience stores.  We manage the count with our retail manager present along with a representative from accounting.  This format helps the speed and accuracy of the count. 

We budget for a loss of 2% in both our c-stores.

Weekly Retail Inventory
We take weekly cycle counts on high-margin items, high-cost items and high-theft items.  For example, we conduct a weekly count of our coffee. Speaking of coffee:

• We also maintain our coffee equipment, which is very important as inconsistent quality resulting from unclean equipment leads to higher waste. 
• We run a coffee host in the early morning hours to help control shrink by maintaining the brewers during this high volume period.

We need to balance our resources so when we limit the amount of weekly inventories.  When we have periods where we exceed our budgeted amount or notice unusual spikes in loss in a particular category or item, we shift our focus.

Balancing Inventory counts
There is no point in producing a variance report if you are not going to balance it.  After conducting inventory counts, we recount and verify variance in quantities over or under 25 units and variances in dollar amounts over or under $50.

Asset Protection
You need to have asset protection policies in place.  Here is what we do and recommend:

• We have inventory areas secured with key card access only.
• Have a well-organized stock room with shelves labeled.
• Purge your inventory through clearance sections and accrue an amount through the year so you can just toss those items that you will never sell out.  They accumulate and make for messy stock rooms.
• Video cameras are placed in strategic areas to monitor customers as well as employees.
• We employ a 24/7-security force to monitor the property.
• Utilize magnetic locking peg hooks.  These give your customer the ability to touch the product they are interested in and you still have some good security against theft. 
• Front face your store and maintain as little “outs” as possible.  Our goal is 95% full fill rate on the store.
• Floor presence.  Get out of the office and walk your store.
• Manage your returns with your vendors.  You first need a clear and simple return policy for your employees to follow and would suggest supervisor approval is part of the policy.  Most retail items can be returned to the vendor when they have the original packaging and all the contents in new condition. 
• Have a vendor check in procedure in place.  Don’t let your vendors drop orders off without being properly checked in and inventory verified for quality and quantity.  Once they are gone you’re going to have an up hill battle on getting any credits for variances.

Photo Credit: zimmytws/bigstock.com

If you are interested in learning more techniques to control your shrink, Darren Schulte is teaching a bonus workshop on Wednesday morning of The NATSO Show on shrink management. Attendees will learn more actionable take-home ideas to immediately improve their shrink loss and will leave with an actual shrink management plan to use as a building block for their own.

The opinions and advice given by guest post contributors are not necessarily those of NATSO Inc. The posts should not be considered legal advice. Qualified professionals should be sought regarding advice and questions specific to your circumstances.